Overview of Planning Procedures for Golf Development Projects

(State or Municipality Sponsored Schemes)

This overview does not address issues relating to feasibility or sustainability of golf developments. It is assumed that an independent feasibility study will be commissioned to assess the viability of the project. This document sets out the normal practices and procedures that planning authorities should be prepared for when embarking on such a project, particularly when attempting to finance such development projects from the commercial financial sector. Each step below has been labelled as either Sponsorship Cost (costs that must be initially met by the state or municipality), or Private Sector Cost to indicate which elements can be financed directly by the private sector.

Plan and Feasibility (Sponsorship Cost- Pre financing)

Before any interest can be gained from the private financing sector there must be a full and thorough feasibility study conducted that covers the issues of the long-term sustainability of the proposed development. This would cover things such as the likely uptake of memberships within the region proposed for development, and the likely demand for golf related land development, particularly permanent and holiday homes. Such feasibilities are often drawn up with reference to medium to long-term tourism plans.

Land Allocation (Sponsorship Cost – pre financing)

Municipalities are generally responsible for allocating land for golf development projects, and for the issue of construction licenses. Therefore, it is the municipality that must decide upon the allocation of land and legalise the construction density. However, unlike normal development projects, the allocation of land requires an understanding of the land substructure. If the substructure isn’t taken into consideration, the project could cost far more than necessary due to substantial land preparation costs.

This step should be done in conjunction with retained golf architects who can better advise on ideal soil and water conditions and the terrain required to minimize costs. Ideally, the land area should be large enough (at minimum) to construct an 18-hole championship course and a driving range. These two elements should occupy a minimum of 80% of the total land area allocated for the total development project. The remaining 20% (maximum) should be zoned for construction of up-scale homes and possibly a hotel and club-house facilities.

Land Infrastructure 

(Sponsorship Cost – pre or post financing)

By the time this stage is reached, the state or municipality may decide on the issue of municipal bonds through which to finance the proposed golf course (more on that later in this report). Clearly, if the infrastructure is to be financed through an issue of bonds there has to be an accurate cost calculation built into the overall business plan.

A certain

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proportion of the infrastructure must be in place before an issue of bonds is undertaken. This would include items such as:

Land clearance and deforestation.

Land Sculpturing (to define the course- fairways and greens)

Land preparation (this is an essential element to minimize future maintenance costs. This may involve covering all or some of the course with topsoil, and many even involve the laying of geotextiles to define the fairways and greens prior to covering with topsoil).

Turfing (golf courses usually have several grades of turf to create the various elements of the course. For example, the fairways will usually have a different grade of turf to the areas defined as ”greens’’)

General landscaping (this covers the cost of providing a scenic environment for the course as a whole and may include the introduction of local flora and fauna, trees and turfing, seeding or planting of areas known as the ‘’Rough’’

Irrigation (the entire course should have a pre-plumbed and automated irrigation system that will allow for the irrigation of all or selected parts of the course as weather conditions demand).


Based on normal ground conditions you can build 18 holes for anything from €2,500,000 - €5,000,000 for a high end course with lots of detail, significant earth movement, lakes and special features i.e. the Championship signature.  A lot of the costs are in the detailing - buggy tracks, halfway houses, infrastructure, 2 driving ranges, lighting, special planning for future championships, TV, Tented village etc. Other factors will be obviously the site characteristics and if suitable materials (sands and gravel are available locally without importation) and if local plant can be used for the basics leaving the specialist works to our shapers and project managers. Assuming that the sites are normal then I would budget €7,000,000 for the Championship course, €5,000,000 for the High End and €3,500,000 for the Members course.

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Ongoing Maintenance Costs

The course itself must be correctly maintained- even before properties are constructed and sold to individual buyers. Initially, the sponsor must meet these costs. It is recommended that a budget provision be made for an initial maintenance that covers the expected construction timescale and ADDED to the overall budget. Once property construction is completed, each developer will be responsible for meeting the annual maintenance costs until such time as the costs can be passed on to the individual property owners.

To facilitate annual maintenance costs and to make provision for the charging of common expenses (rubbish clearance, street lighting, gardening and general maintenance of development zones)each property developer should establish a ‘’Community of Owners’’ who will have the authority to collect annual charges from owners and disburse them as required. Any local property taxes can be collected directly from the owners by the local municipality, or collected from the community of owners who will include such taxes in the annual common expenses. The decision as to which collection method should be used will depend largely upon the resources of the local municipality.

Operation of the Golf Course

Once all properties are sold, the golf course will technically be owned by the property owners (either by land deed or virtue of golf shares). Therefore, a separate company should be established under which all owners, or golf share owners become shareholders. It will be up to this company to decide on the management of the course, and the charging structure for golf course use. Ideally, the company should aim to make a taxable profit on the golf course operation. This will minimize, pr completely eliminate maintenance cost contributions from owners. Instead, they should be in the position to receive profit dividends from the course operation. The shareholders should have the right (annually) to appoint either a professional management company, or a management team to run the golf facilities.

Income Opportunities

• Sale of Golf Memberships

• Green Fees (charged for actual play on the course)

• Golf equipment Hire (clubs, trolleys and golf carts)

• Golf Tuition

• Driving Range Charges

• Merchandising (the selling of branded apparel- shirts, caps, shorts, jackets, umbrellas and golf shoes)

• Golf Equipment Sales Outlet (normally licensed to a professional golf retailer)

• T ournaments

• Food and Beverage (outlets licensed to outside professional caterers)

• Golf Tourism (a separate management company that can holiday-let owner’s property when not being used, or arrange

golfing holidays in conjunction with a golf hotel that maybe constructed on the site- income is generated through property management and booking fees)

Further Expansion

Upon completion of the course, and its initial development zones, the local municipality can, if it wishes, expand the development area beyond the boundaries of the initial project. This will open the surrounding area to controlled development of new residential communities or tourism facilities, such as hotels etc. Whilst these expanded developments will not be directly involved

 Financing Options

Subject only to the procedures outlined above, the best financing option is to issue a municipal bond through the Bourse de Luxembourg. Such a bond would be issued for a term of circa five years and should carry an attractive rate of fixed interest (better than current rates) in order to attract investor interest. Municipal bonds are usually guaranteed by way of a Trust Indenture under which an independent Trustee Company holds the security for the financing. The security is usually in the form of a combination of assigned land title deeds and municipal, state or sovereign guarantees that are backed –up by contractual guarantees. In this case, the guarantees would be the completion guarantees issued to the municipality by the successful development tenders. The usual method involves initially registering land title to the chosen Trustee Company who holds title in trust on behalf of future bondholders. Once all outstanding bondholder obligations have been met, the land title is transferred by the Trustee Company to the Company established for the ownership and running of the golf course. Additionally, completion guarantees will be issued to the municipal or state bankers who, in turn, issue a repayment guarantee to the Trustee Company on behalf of the municipality or state.

By following this procedure the Trustee will be able to enter into a Trust Agreement with the Municipality or state under which the trustee will act to protect the interests of future bondholders- in effect, each bondholder is entering into a loan agreement that is guaranteed by an independent third party (the Trustee).

An alternative option would be to approach a major international investment bank that will be able to syndicate private loan finance from financial institutions. The guarantees would be much the same as those required for a municipal bond placement, but may involve less cost in setting up the deal.

Overview of Planning Procedures for Golf Development Projects January 2016

Land Budget Calculation, Financing and Cost Recovery

A final budget should be drawn up that includes all the sponsorship and pre-financing costs. This will form the basis of a financing proposal that can be tendered to the private financing sector, or form the basis of a municipal bond placement. Typically, in any financing proposal (whichever option is chosen), there must be plausible provision for repayment over the short to medium term. This repayment provision will typically come from the private sector through the selling of construction rights within the areas zoned for construction. The best way to demonstrate repayment capability is to apply the following procedure:

• Split the project into 5 or more development zones.

• Tender the construction of those Zones to 5 or more separate development companies. (The calculation of the development land price will be 

TOTAL FINAL BUDGET plus FINANCING COSTS divided by the ACTUAL DEVELOPMENT LAND AREA in square metres. The final square meter cost in then multiplied by the ACTUAL SQUARE METRES of each development zone. Each developer can then make stage payments over the financing term in order to meet the sponsors repayment obligations, and to recover the sponsor’s pre-financing costs)

Property developers will recover the land cost on the subsequent sale of individual properties. It should be remembered that all developers may well construct multi-unit properties that can double and triple the constructed square metres. Therefore, the land costs will be commensurate with the property asking price. For those developers that choose to construct sinle occupancy units such as villas or houses, the land cost will form a greater proportion of the resale price of properties, but this is only to be expected.

Another cost recovery option is to allocate golf shares to each property constructed (based on the square metres of each individual property). These shares can confer certain ownership rights, such as the right to use the golf course without a membership fee or the right to receive profit dividends from the golf course. Such shares would be sold separately from the actual property (although purchase of shares will be mandatory on the first sale). This will then allow property owners to sell or retain their shares to sell to others at some future time. It maybe that a golfer who initially buys and then sells his property, may wish to keep the golf shares in order to retain golfing privileges at the course. In such a case, the new property owner (who may not have an interest in golf) would buy the property only and not have any rights to use the golf course.

When tendering for construction rights, developers should be forced to meet certain density criteria in order to keep the development as a whole free from over-development and to ensure adequate green spaces within their construction zone. Typically, construction should be limited to 30%-50% of zoned land area- the remainder of the zoned land to be used for the creation of landscaped communal areas and roads. Underground parking facilities should also be mandatory for multi-unit construction.

Particular car should be given to the selection of tenders, as the financial standing of individual construction companies will form the basis of security for the eventual finance of the project as a whole. This security element can be achieved by asking each successful tender to provide a bank-endorsed completion guarantee as a condition of granting development rights. These can then be used to back up municipal guarantees issued in connection with the project finance. Individual developers will be responsible for financing their own individual developments within their allocated zones (private sector costs).

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